Assemblyman Fred W. Thiele, Jr. (I, D, WF-Sag Harbor) announced the Assembly passed legislation he supported to provide fiscal relief to distressed municipalities. The measure establishes a permanent Financial Restructuring Board for local governments to help them restructure their finances and achieve other savings and efficiencies. The legislation also improves the binding arbitration process to provide public services in a more cost-effective manner (A.8086).

“Many counties, cities, towns and villages are still struggling from the economic downturn and need help in stabilizing their finances to keep property taxes down,” Assemblyman Thiele said. “This legislation will assist municipalities that have made the tough choices necessary to maintain fiscal solvency. It will give them resources to help them efficiently carry out restructuring plans.”

Financial Restructuring Board

The legislation will establish a new, 10-member Financial Restructuring Board. Membership will include the state budget director, who will serve as chair, the state comptroller, the attorney general, the secretary of state and six other appointed members by the governor. Of the six appointees, one will be recommended by the temporary president of the Senate and one will be recommended by the speaker of the Assembly. At least one of the governor’s appointees will have significant experience in municipal financial and restructuring matters.

Any locality that is determined to be fiscally eligible could request the review by and assistance from the board. Eligibility will be determined based upon average full value property tax rates and available fund balances, similar to the governor’s proposal in the 2013-14 executive budget. The board will have discretion to provide review and assistance to eligible municipalities.

The board will be authorized to make recommendations and to provide awards in the form of grants, loans or a combination thereof of up to $5 million per municipality through the Local Government Performance and Efficiency Program, which is funded at $80 million this year. If an eligible municipality agrees to accept financial assistance, it would be required to implement all of the recommendations of the board.

“State funding for financially distressed communities is exactly what struggling local governments need to help get them on the right track,” Thiele said. “Communities won’t have to resort to more extreme measures or hike property taxes to get past their economic problems.”

Binding arbitration process

The board will also serve as an alternative arbitration panel to the binding arbitration process for police, fire or deputy sheriff unions, if the municipalities and unions agree. The board will render an arbitration ruling within six months and resolutions will be binding for no more than four years.

Under this legislation, the statute authorizing binding arbitration will be extended for three years, rather than four years as was most recently enacted. For fiscally distressed localities, the statute will establish clear “ability to pay” standards that arbitration panels will be obligated to follow. Fiscal distress will also be determined based upon average full value property tax rates and balances available in the general fund or other funds, generally as proposed in the 2013-14 executive budget.

For distressed localities, arbitration panels must give 70 percent of the weight of their decision to ability to pay, and must specifically consider the requirements and limitations of the state’s property tax cap. The remaining 30 percent of the weight will be afforded to the other statutory criteria such as wage comparison, prior contracts and public interest. Under current law, there are no assigned weights to these measures, and there is no obligation to consider the property tax cap.

“By striking a balance in the binding arbitration process, resolutions will be based on both the ability of a municipality to pay and the merit of the issue at hand,” Assemblyman Thiele said.